To buy now or wait.......that is the question!

Many clients tell me "I really want to buy my dream property in Costa Rica, but I need to wait for markets to recover at home so I can sell my current property and use those funds to purchase a Costa Rica property".

Now for those clients who are "under water" and in negative equity with their current property, this is true. They will have to wait until markets recover and they regain some equity in their property. They can then sell (or perhaps refinance) and use the equity release to purchase in Costa Rica.

But what about those clients who have equity in their home property, what should they do?

Well that depends on their view of where their home property market and the Costa Rica property market are going.

My view is that the Costa Rica property market is going to outperform most other fallen markets for a range of reasons:

• increased demand from retiring baby boomers from the USA and Canada
• increased demand from US citizens due to dissatisfaction with the US economy and politics
• increased demand from US citizens seeking to protect funds from foreign exchange controls (Hire Act and more).

So if you own a property and the local property market preforms the same rate as the Costa Rican market. You have effectively "stood still" by waiting a number of years to buy. See the example below:

Property value in the USA year 1                                        Property you wish to buy in Costa Rica year 1

US$100,000                                                                          US$100,000

Property markets double over 5 years in both markets

Property value in the USA year 5                                        Property you wish to buy in Costa Rica year 5

US$200,000                                                                          US$200,000

So by waiting 5 years you are in exactly in the same position as you were 5 years before, you can only buy the same property.

Of course if the property market does not perform at the same rate as the Costa Rica property market then you're actually losing

Property value in the USA year 1                                        Property you wish to buy in Costa Rica year 1

US$100,000                                                                          US$100,000

Property markets double in Costa Rica and go up by 50% in the USA over 5 years

Property value in the USA year 5                                        Property you wish to buy in Costa Rica year 5

US$150,000                                                                          US$200,000

In this scenario, through circumstances that are out of your control, by waiting 5 years, you cannot now buy the property you could have bought 5 years before.

Of course for those that are highly leveraged (have mortages or other finance on their property) the calculation is not quite the same - increases in the local property market results in relatively larger increases in equity. But remember the contrary is also true, decreases in the local property market results in exponentially larger falls in equity. However, fundamentally if the Costa Rica property market outperforms your local home market, you will struggle to keep up and likely end up being able to purchase less in Costa Rica by waiting.

Something to think about!

Perhaps now is time to take action. Why not contact us at USA +1-866-990-1123 (toll free) or Europe +353-1-272-4184 or at info@costaricainvest.ie or speak directly with your consultant. We have a range of solutions for clients (trades, RRSP, 401k, developer finance, IRA funds)